Splitting Banks Would Only Make Things Worse: Pro

The former CitigroupCEO and chairman—who invented the idea of the mega-bank that does everything from stock trading to checking accounts to life insurance—told CNBCWednesday that it’s time the big banks were broken up.

Essentially, it would mean a return to the Glass-Steagall Act, the depression-era rule that separated commercial banks from investment banks but was rescinded by Congress in 1999. Weill, however, didn't explicitly recommend the rule be revived.

Jeffery Harte, a principal at the investment bank Sandler O’Neill, told CNBC’s “Squawk on the Street” Wednesday that he doesn’t see how separating the two businesses protects the financial system from risk.

Time to Separate the Banks?

Is it time to revert back to the Glass-Steagall Act? Jeffery Harte, Sandler O'Neill principal, responds to comments made by Sandy Weill on CNBC's "Squawk Box" earlier today on whether it is time to separate investment banks from banks.

“That’s rooted in a misconception that dull equals safe,” he said.

It wasn’t the investment banking operations that triggered the 2007 financial crisis but the housing bubble, Harte said. And forcing banks to split could make the problem of financial institution inter-connectedness even worse, he said.

“Increasing capital requirements, having some correlation between assets so you don’t get concentration of risk and better transparency and reporting” are better alternatives, Harte said.

Tim Ryan, president of Wall Street lobbying group the Securities Industry & Financial Markets Association, also told CNBC, Weill is wrong to call for breaking up the big banks and said SIFMA would "vigorously oppose" such plans.

'Would Vigorously Oppose' Breaking Up Banks: Lobbyist

Tim Ryan, SIFMA president & CEO, shares his opinions on Sandy Weill's statements regarding breaking up the banks on CNBC's "Squawk Box" today. "We would vigorously oppose [breaking up the banks] because it doesn't make any sense and has been rejected for the last three years," he says.

He said that clients actually like the universal banking model because big banks have a global reach. Furthermore, the model makes it easier for investment banking operations to fund themselves.

Breaking up the big banks was already rejected by the Obama administration and Congress after the financial crisis, Ryan noted, adding “I doubt very seriously it will on the agenda of Congress near term.”